BFREE raises fresh capital to scale distressed debt buying across Africa

Pan-African distressed credit investor BFREE has raised new funding to expand its business of buying non-performing loans, as banks and fintechs across the continent struggle with rising bad debts.

The Lagos-headquartered firm said on Tuesday that the growth equity round was led by AfricInvest through its Financial Inclusion Vehicle fund, with participation from Algebra Ventures and several existing investors.

Financial details of the deal were not disclosed, but the company said the funding would significantly increase its ability to acquire distressed loan portfolios and expand into new African markets.

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The investment comes at a time when digital lending has grown rapidly across Africa, but recovery of unpaid loans remains weak, creating pressure on lenders’ balance sheets.

“Many financial institutions still lack efficient ways to resolve non-performing retail and SME loans. This funding allows us to scale faster and take on larger portfolios,” said Julian Flosbach, BFREE chief executive.

BFREE buys unpaid loans from banks, fintechs and other lenders, then works with borrowers to recover part of the debt through structured repayment plans. The company said it has completed more than 35 transactions and manages over 11 million borrower accounts across multiple markets.

Analysts say the model is gaining traction as lenders look for alternatives to writing off bad loans entirely.

“High-growth digital lending has created a large volume of small-ticket non-performing loans. There is a clear need for institutional buyers who can manage and resolve these assets efficiently,” said Patrick Herrmann, partner at AfricInvest.

Unlike traditional debt recovery methods often criticised for aggressive tactics, BFREE said it uses a technology-driven approach focused on what it calls ethical collections, aiming to improve repayment while maintaining borrower trust.

The company has also introduced forward flow agreements, where it commits to buying newly defaulted loans from lenders on a continuous basis, providing them with a more predictable way to manage credit risk.

Industry experts say this model could help deepen Africa’s credit markets by improving liquidity and encouraging more responsible lending.

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Algebra Ventures, which is making its first investment in a Nigeria-headquartered company, said unresolved retail and SME debt across Africa runs into billions of dollars annually.

“Healthy credit markets need a disciplined buyer for distressed debt. BFREE is building that infrastructure,” said Omar Khashaba, general partner at Algebra Ventures.

The new capital will be used to fund larger acquisitions, strengthen partnerships with financial institutions and support expansion into additional countries where demand for distressed debt resolution is growing.

As Africa’s lending ecosystem matures, investors are increasingly betting that companies like BFREE will play a critical role in cleaning up balance sheets and sustaining credit growth across the continent.